Why every trader needs a psychologist

01 Feb Why every trader needs a psychologist

If there’s one thing the latest television series ‘Billions’ has depicted perfectly about Wall Street trading, it is the importance of psychologists. There’s certainly no exaggeration on this front – psychologists can dramatically increase traders’ performance and returns. Quite often, in the wake of an unsuccessful position, a trader’s testosterone levels will diminish. Irrespective of whether they were on a streak beforehand, or what capital they may have accumulated until that point, the loss can deal a severe blow to their confidence and morale  – all the more so in instances where a losing streak emerges. As such, the role of the psychologist is to help the trader look at the ‘bigger picture’ – alleviate their concerns; keep them calm and focused; and ensure they are in the right mental space to execute rational trades – there is nothing worse than chasing losses by acting in the ‘heat of the moment’.

Television drama series ‘Billions’ has portrayed the importance of trading psychology

Television drama series ‘Billions’ has portrayed the importance of trading psychology


In the same vein, you will find that all successful traders benefit from a coach they can turn to – a coach is in a position to objectively look at their positions, without any investment bias that creeps in when a trader has an ‘emotional’ connection with the trade – for example, holding onto a loss in the hope or expectation it will reverse course, or because others are ‘wrong’. Their ability to provide continual feedback and monitor the trader’s behavioral responses or actions are just a couple of the invaluable traits that enable success. On this note, external evaluation (either from a psychologist or coach) can allow a trader to realize they should cut all their losses and make a fresh start, which in turn will allow them to maintain their composure and renew focus on making new trades profitable. Without this type of guidance, the reality is traders might be oblivious to the situation, or too stubborn to exit a losing position – even worse, they might abandon their stop loss strategy, or neglect to use one, which only heightens the problem. Ultimately, these are just some of the factors upon which people define trading as a mental game, and if one is serious about their career in the industry, wouldn’t it be in their best interest to ensure they are in the right psychological state from time to time?

Being a trader is by and large, an independent journey. With that said, it is critical one invests in their own cognitive and behavioral skills to facilitate this journey, which is why it is important to have a psychologist and coach on hand for the difficult times where one might be struggling.


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